2.3 T RUSTS AS AN INSTITUTION TO HOLD PROPERTY
2.3.1 History of the institution
There are several debates about how trusts as an institution to hold property came to be embedded in English law (Manie, 2015; Bruwer, 2018). Manie (2015), argues that regardless of the uncertainty about the origins of the use of trusts, each of the possible predecessors of the English trust was developed in response to social and practical problems that were prevalent at the time. As a result, the context of the time was important in shaping the development of the institution to what it is today (Manie, 2015). Some of the commonly proposed theories of the origins of trusts include the Roman fideicommissum, the Germanic Treuhand and the Islamic waqf theory (Manie, 2015; Du Toit et al., 2019).
The Roman fideicommissum was introduced into Roman law to avoid the rigidity of the law that prohibited certain individuals for example non-Romans from being beneficiaries of a will.
Through the fideicommissum, the testator was able to entrust a third party a property that would then be transferred to the person who was the desired beneficiary (Manie, 2015). By extrapolation, the argument is that the testator is the settlor in the English trust, with the third party who is entrusted with the property being the trustee in the English trust.
The second theory is the Germanic Treuhand which allowed for a third party, the Salman, to assist in the transfer of a property (Du Toit et al., 2019). The transfer between the owner of the asset and Salman had to happen while both parties are alive. Upon the death of the original owner of the asset, Salman, transferred the property to the designated beneficiary (Manie, 2015). As such the transfer to the Salman was an intermediate process in that the Salman was there to complete the transfer of a property in an instance where the transfer to the beneficiary could not happen immediately, for example in cases where an heir still had to be born or appointed.
Lastly is the Islamic waqf theory which is described as an unincorporated charitable trust. It is created by a declaration by the owner specifying that the income of a designated property is to be permanently used for a specific purpose (Manie, 2015). Manie (2015) argues that by looking at the historical periods the Islamic waqf is more likely to have been the predecessor of the use of trusts present today. Islamic waqfs would have been introduced into England following the return of the Crusaders who would have observed the working of waqfs in the Middle East.
Waqfs would have been attractive to the Crusaders as the principle of the waqf could be used as means to avoid feudal dues. At the time, the Mortmain Statutes passed in the late fourteenth century prohibited the gifting of land to church organisations without royal consent (Manie, 2015). Some of the similarities between the waqf and the current use of trusts include that the property held in trust is reserved by the founder and its use is earmarked for the benefit of specific individuals or charitable purposes. The property becomes inalienable which means it cannot be subject to sale, transfer, or separation (Manie, 2015) and this ensures its protection.
Both can exist in perpetuity and the continuity is guaranteed through the successive appointment of trustees (Manie, 2015). In line with the perpetual nature of the waqf, successive beneficiaries can be created. Structurally, they are the same with identical parties that existed in both, the settlor/waqif, the trustee/mutawalli and then the beneficiaries both in the present and the future (Manie, 2015).
It appears that the success of the introduction of the waqf principles in the use of trusts in England was short-lived. Hare (1998) gives an account of the emergence of Charitable Trusts in England showing that for some time trusts existed under common law and were largely unregulated until the seventeenth century when Parliament enacted the Statute of Charitable Trusts. Parliament argued that this statute was an attempt to prevent the misuse of funds to the detriment of the beneficiaries that was believed to be occurring due to the unregulated nature of these trusts. To protect and enforce charities, the Statute of Charitable Trusts empowered courts to appoint commissioners to examine donations to charity (Hare, 1998). While noting this, Hare (1998) goes further to argue that another motivating factor for the introduction of the Statute of Charitable Trusts was the need to protect the aristocracy from being deprived of property that would otherwise fall on them when an individual passed on. Before the statute was passed individuals were able to pass their property to charities with no regulation from Parliament (Hare, 1998).
If one overlays the accounts of Manie (2015) and Hare (1998), it appears that for an extended period, individuals had limited control over what happened to their property after their death due to the limitations of Mortmain Statutes that required individuals to obtain permission from the King to bequeath their property to third parties. This limitation would have made the principles of the Islamic waqf attractive to circumvent this limitation. Parliament might have allowed the use of waqfs principles in trusts for some time which is in line with Hare (1998)’s observation that for a long-time, trusts existed unregulated under common law. Perhaps with the increased use of trusts by individuals, Parliament later found them unfavourable as they were seen to be depriving the aristocracy of property that it otherwise would be entitled to post the death of individuals. Importantly at this point, Parliament was made up of the King and the aristocracy meaning there was a vested interest within Parliament to control private estates. Of course, that abuses were occurring to the detriment of the said beneficiaries might have been true, however, what is important for this study is what the oversight did to property relations.
The Statute of Charitable Trust empowered the courts, which are the judicial arm of the state, to regulate these trusts. In enacting the Statute of Charitable Trusts, the state was firmly entrenching itself as an actor in the management of private property. This action would influence the management of property by creating a complex structure under which property is controlled and blurring the boundaries of control.